IEA trims oil demand forecast, sanguine on Iran sanctions

The IEA trimmed its forecast for oil demand growth because of gloomy economic prospects, but said today that markets were taking tougher international sanctions on Iran in their stride.

The International Energy Agency cut its forecast for growth in oil demand this year of 0.8 million barrels per day  (mbd) from 1.1 mbd after the International Monetary Fund slashed its estimate for global economic growth in 2012 to 3.3 per cent from 4.0 per cent.

The IEA was largely sanguine about the impact of tighter international sanctions on Iran, including an EU import ban  which takes effect in July. 

"Despite tougher new sanctions by the international community, the market is largely still taking the situation in its stride," said the IEA, which is the energy monitoring and  policy forum of the OECD, in its monthly review.

It said "the market in 2012 likely has sufficient  supply-side flexibility ... to adjust to any loss in Iranian volumes" given OPEC space capacity and expected new sources. 

And while "perceptions of impending supply issues are  clearly placing a floor under oil prices for now," said the IEA, it has been a severe cold snap in Europe that has drove Brent crude prices to six-month highs in early February.